Law:

Section:

Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of - Assessment year 1974-75 - Assessee had entered into an agreement with 'S' recognizing him to be occupancy tenant in respect of certain land - A declaratory decree was subsequently passed by Court whereby said agreement was given Court's sanction in terms of section 3 of Punjab Occupancy Tenant's (Vesting of Proprietary Rights) Act, 1952 - During relevant assessment year, said land was sold - Assessing Officer added amount received by assessee on sale of said land to his income as capital gain - Whether since assessee had acquired ownership rights in land by operation of law and not by purchase or inheritance, cost of acquisition of said land was nil and, therefore, assessee was not liable to pay any capital gains tax - Held, yes FACTS The assessee had entered into an agreement dated 14-2-1970 with 'S' recognising him to be occupancy tenant in respect of certain land. A declaratory decree was subsequently passed by the Court whereby said agreement was given the Court's sanction in terms of section 3 of the Punjab Occupancy Tenant's (Vesting of Proprietary Rights) Act, 1952. During the relevant assessment year, the assessee sold said land. The case of the assessee was that since right of ownership of the land was acquired by him by operation of law and not by purchase or inheritance, he was not liable to pay any capital gains tax. However, the Assessing Officer did not agree with the assessee and added the amount received by him on the sale of said land to his income. On appeal, the Commissioner (Appeals) held that no taxable capital gain arose because the capital asset did not cost anything to the assessee in terms of money, but had been acquired merely by operation of law. On the revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). On reference : HELD A perusal of the facts of the instant case would show that the assessee became the owner of the land in respect of which he had earlier acquired only the tenancy rights. Thus, the assessee had acquired the ownership rights in the land by operation of law and not by purchase or inheritance. [Para 11] There was no…

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